* IN THE HIGH COURT OF DELHI AT NEW DELHI

Reserved on : 21.07.2023
% Pronounced on : 09.10.2023

+ O.M.P. (COMM) 165/2023

IN THE MATTER OF:

IRCON INTERNATIONAL LIMITED ..... Petitioner
Through: Mr. Suman K. Doval, Mr. Hari
Krishan Pandey and Mr. Preetpal
Singh, Advocates.

versus

DELHI METRO RAIL CORPORATION ..... Respondent

Through: Mr. Tarun Johri and Mr. Ankur
Gupta, Advocates

CORAM:
HON'BLE MR. JUSTICE MANOJ KUMAR OHRI

JUDGMENT

MANOJ KUMAR OHRI, J.

1. By way of present petition instituted under Section 34 of the
Arbitration and Conciliation Act, 1996 (hereafter, the ‘A&C Act’), the
petitioner (hereafter, ‘Contractor’) seeks partial setting aside of the Award
dated 22.11.2022 (hereafter, the ‘impugned award’) in relation to Claim
Nos. 2, 3, 4 and 12 delivered by the Arbitral Tribunal (hereafter, the ‘AT’).
2. The impugned award came to be passed in the context of disputes

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arising w.r.t the work of ‘Supply, Installation, Testing and commissioning of
Ballastless Track of Standard Gauge, Part-I Corridor of sections of
Mukundpur-Lajpat Nagar (excluding) Line-7 in elevated and underground
sections alongwith ballasted/ballastless tracks in Mukundpur Depot of Delhi
MRTS Project of Phase-III’.
3. The respondent (hereafter, ‘DMRC’) invited bids for the said work,
which was awarded to the Contractor vide Letter of Award dated 17.02.2015
for a total contract value of INR 153,65,61,349/- + USD72,65,823/-. The
Contract period was of 24 months with scheduled date of start as 23.02.2015
and scheduled date of completion as 22.02.2017. A formal Contract was also
executed between the parties. The work was completed on 06.08.2018 i.e.,
after a delay of 18 months. DMRC had granted extensions of time
(hereafter, ‘EOT’) for the entire prolongation of contract without levy of any
liquidated damages.

DISPUTES BEFORE THE AT

4. The Contractor filed its statement of claims (hereafter, ‘SOC’) thereby
raising as many as 12 claims. Claim Nos.2, 3, 4 and 12, that are in issue in
the present proceedings, are extracted hereinbelow:-

Claim No. Description of Claim Amount

2(a) Claim on account of extra Rs.6,05,50,281.00
Cost on increased
Establishment Cost
including Overheads,
Salary of Regular and
Contractual Staff,
Inspection Vehicle hire
Charges, etc. due to
prolongation of contract

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 2(b) Claim on account of extra Rs. 43,035.00
cost due to payment of
bank charges for repeated
extension of
Performances Bank
Guarantee beyond
stipulated completion
date
2(c) Claim on account of extra Rs.65,04,290.00
cost due to extension of
CAR and WC Insurance
Policy
2(d) Claim on account of Loss Rs.8,67,59,946.00
of Profit because of
prolongation of contract
2(e) Claim on account of Rs. 12,43,393.00
Extra cost due to
depreciation due to
prolongation of contract
period
3 Claim on account of Rs.1,28,87,297.00
additional cost due to use & USD64,987.00
of 04 bolt fastening
system for radius beyond
700 mt.
4 Claim on account of INR 1,47,44,999.00
abnormal increase in & USD64,987.00
quantity of track
fastenings
12 Claim on account of Rs.56,40,553.00
Additional GST burden

5. The Contractor contended that under the Contract, DMRC was

obligated under the Contract to provide the project site progressively. For
the delay of 18 months in completion of the project, the Contractor laid the
entire blame on DMRC. It was contended that DMRC not only delayed in
handing over the project site but also unilaterally changed the design which

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resulted in abnormal increase in quantities of Fastening System causing
variation to the extent of 450-900%. Additionally, the DMRC, in deviation
from Bill of Quantity (hereafter, ‘BOQ’), gave new bolt calculations as per
which fastening for curve track radius above 1000 was to be fitted with two
bolts and below 1000 to be fitted with four bolts. The Contractor submitted
the Claim for variation in quantities of Item No.8 of BOQ vide its letter
dated 31.08.2017 (amended by letter dated 12.11.2018). DMRC also asked
the Contractor to execute certain non-scheduled items which were not part
of the Contract. It was further contended that during the execution of the
Project, GST regime came into force resulting in additional tax burden on
the Contractor, for which Contractor raised claims with DMRC. DMRC
agreed to reimburse @1.40% towards additional burden on account of GST
for the work done beyond 01.07.2017.
6. DMRC contested the claims and filed its Statement of Defence
(hereafter, ‘SOD’). It attributed delay in completion of the Project to the
Contractor, for which it referred to the Monthly Progress Reports whereby
the Contractor was repeatedly informed about the shortage of manpower and
material on the Project site. The EOTs were granted without imposition of
liquidated damages and with payment of price escalations in terms of Clause
No.11.1.3 of Special Conditions of Contract (hereafter, ‘SCC’). Insofar as
the aspect of the design was concerned, DMRC contended that the same
was, as per clause 5.1 of General Conditions of Contract (hereafter, ‘GCC’),
within the scope of the work awarded to the Contractor. The design was to
be in conformity with the criteria of fastening system laid down by the
Ministry of Railways which formed part of the Contract. The design
proposed by the Contractor was subject to approval by the

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Engineer/Employer, who could propose changes thereto as per the
requirement of the overall design. It was contended that the change in design
sought by the EIC was attributable to the Contractor. DMRC also challenged
the variation of quantity of work under Item 8 of BOQ pertaining to “Supply
of Track Fitting”. It was contended that the BOQ rate for Item 8 were
neither sought for by DMRC on the basis of number of bolts nor the same
was quoted by the Contractor. The BOQ rates were differentiated for two
sub-items namely for track with radius flatter than 1750 metres under BOQ
Item 8.1 and for curved tracks under BOQ Item 8.2. Item 8.2 had further
sub-items (a), (b), (c) and (d) for different radius of the curved track.
According to DMRC, the actual variation in quantity from the BOQ quantity
was only 6.55% for which payments have been made in line with Clause
12.5 of the GCC.

IMPUGNED AWARD
7. AT agreed with the Contractor and held that the time was the essence
of the Contract. While considering Claim No.2, the same was sub-divided
into 5 sub-claims as under:-

2(a) Claim on account of Rs.6,05,50,281/-

extra Cost on increased
Establishment Cost
including Overheads.
Salary of Regular and
Contractual Staff,
Inspection Vehicle hire
Charges, etc. due to
prolongation of
contract
2(b) Claim on account of Rs. 43,035/-

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 extra cost due to
payment of bank
charges for repeated
extension of
Performances Bank
Guarantee beyond
stipulated completion
date
2(c) Claim on account of Rs.65,04,290/-
extra cost due to
extension of CAR and
WC Insurance Policy
2(d) Claim on account of Rs. 8,67,59,946/-
Loss of Profit because
of prolongation of
contract
2(e) Claim on account of Rs 12,43,393/-
Extra cost due to
depreciation due to
prolongation of contract
period

While Claim Nos.2(a), (b) and (c) were partially allowed, Claim
Nos.2(d) and (e) were rejected. While doing so, AT relied on Clause 8.3 of
GCC as modified by Sl. No. 22 of SCC. AT further noted that the Contractor
had sought EOT on four occasions and only when EOT was sought on the
third occasion, the Contractor reserved its right for seeking compensation
due to prolongation of Contract on ground of delay in handing over of
stretches and taking over of works. On other occasions, no such right was
reserved. Accordingly, while referring to Clause 4.4 of the Contract and
Clauses 2.2 and 8.3 of the GCC, AT concluded that out of the 18 months of
the period of prolongation, period of 12 months was without any financial
implication as mutually agreed between the parties and thus the claim for

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compensation with respect to those 12 months was rejected. However,
considering the period of six months under the third EOT i.e., from
01.01.2018 to 30.06.2018, AT awarded proportionate amount under sub-
claim Nos.2(a), (b) and (c). AT did not find any merit in the claims for loss
of profit and extra cost claimed due to depreciation under sub-claim
Nos.2(d) and (e). In concluding so, AT noted that the Contractor did not
provide any cogent evidence for them.
8. Claim Nos.3 and 4 were taken up together for consideration as both
pertained to Ballastless Track Fastening System. Claim No.3 related to
change in design and Claim No.4 related to abnormal variation in the
quantity of Ballastless Track Fitting System. AT observed that the claims
related to deviation in quantity of Item No.8 in BOQ.
AT observed that under Clause 5.1 of the Contract, the design was in
Contractor’s scope, who was obligated to submit the same in accordance
with Clause 6.3.2 of the Contract. The first technical design submitted by the
Contractor on 03.06.2015 was found to be technically deficient with number
of non-compliance issues as indicated by DMRC in its letter dated
08.06.2015 and a reminder dated 02.07.2015. The Contractor changed the
complete design and resubmitted new bolt calculations vide its letter
19.09.2015. This aspect as stated in SOD was not specifically denied by the
Contractor in its rejoinder. On the aspect of ETAG001 (European
Guidelines), AT observed that the Contractor did not place any document on
record evidencing its objection that the same did not form part of the
Contract. AT also observed that vide its Procedure Order No.13, though the
Contractor was asked to submit its point-wise reply to DMRC’s second
report dated 08.07.2015, a bunch of documents was filed without any point-

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wise reply. AT further observed that the BOQ specified in the Contract was
not based on the number of bolts to be used but was based on the radius of
curve i.e., 1750 m and 500 m without specifying number of bolts to be used
on curves. Thus, AT rejected both the claims.
9. While partially allowing Claim No.12 relating to additional GST
burden, AT noted that the Goods and Services Tax Act came into effect on
01.07.2017. In its claim, the Contractor claimed 18% GST from August,
2017 to February, 2018 and 12% thereafter as per applicable GST rates on
work contracts. AT noted that on claim being raised by the Contractor with
DMRC, the latter was initially willing to reimburse @1.40% towards
additional burden on account of GST after taking into consideration the
taxes that were applicable and payable by the Contractor during the pre-GST
regime which were subsumed in the post-GST regime, and also input credits
availed by the Contractor. The Contractor had rejected DMRC’s offer of
1.4% reimbursement, and the same was withdrawn by the latter. While
referring to Clause 27(v) of the SCC, the AT concluded that though the
contract price was not to be adjusted on account of change in
taxes/duties/levies, GST being a new tax was not barred by the aforesaid
clause. The Contractor was asked to submit documents related to filing of
GST returns and deposit of GST on the invoices raised by DMRC. AT noted
that the total amount of GST deposited matched with the calculation sheets
of the Contractor, however, from the one-page statement submitted by the
Contractor, the amount of input credit availed by it could not be
substantiated. Resultantly, AT allowed the claim by awarding
Rs.26,44,277/- towards the additional GST burden @1.40%. In total, AT
passed an Award holding the Contractor entitled for a sum of

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Rs.3,93,03,109/- towards various claims along with interest @10% per
annum on the awarded sum from the date of the Award till payment.
10. DMRC has not challenged the Award and the entire award amount
has been paid to the Contractor.

SUBMISSIONS BEFORE THIS COURT

11. It was contended on behalf of the Contractor that the partial rejection
of Claim No.2 by AT suffers from patent illegality, inasmuch, AT while
limiting the compensation to six months, returned a perverse finding that in
seeking EOT on the first, second and fourth occasion, the Contractor had not
reserved its right to seek compensation, which amounted to a waiver. AT
wrongly relied only upon Section 55 of the Indian Contract Act, 1873
(hereafter, ‘ICA’) instead of reading it in conjunction with Section 73, ICA.
The rejection of Claim Nos.3 and 4 is also hit by the vice of patent illegality.
AT overlooked that the insistence of DMRC to use four bolts instead of two
on certain curves was in departure from International and National practice.
Further, AT failed to appreciate that Clause at S.No.31 of SCC had replaced
the earlier Clause No.12.5(ii)(f). The replaced new provision provided that
positive variations above 25% in individual or group of items would be
considered for negotiation of rates. AT also overlooked that the replaced
new clause had equated group of items with individual items. Contractor
also called into question AT’s finding w.r.t. Claim No.12 being patently
illegal. It contended that GST ought to have been granted @12%.
12. DMRC negated Contractor’s contentions and defended the impugned
award. It denied that Clause 31 of SCC brought any change in Clause
12.5(ii)(a) of the GCC as contended by the Contractor. It further stated that

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AT’s conclusions are findings of facts which cannot be reappreciated by this
Court under Section 34 of the A&C Act.

DISCUSSION & CONCLUSION

13. Contractor’s entire challenge to the impugned Award is premised on
the ground of ‘patent illegality’ which has been explained in plethora of
decisions lastly being Delhi Airport Metro Express (P) Ltd. vs DMRC1,
wherein it was stated that:-
“29. Patent illegality should be illegality which goes to
the root of the matter. In other words, every error of law
committed by the Arbitral Tribunal would not fall within
the expression “patent illegality”. Likewise, erroneous
application of law cannot be categorised as patent
illegality. In addition, contravention of law not linked to
public policy or public interest is beyond the scope of the
expression “patent illegality”. What is prohibited is for
courts to reappreciate evidence to conclude that the
award suffers from patent illegality appearing on the face
of the award, as Courts do not sit in appeal against the
arbitral award. The permissible grounds for interference
with a domestic award under Section 34(2-A) on the
ground of patent illegality is when the arbitrator takes a
view which is not even a possible one, or interprets a
clause in the contract in such a manner which no fair-
minded or reasonable person would, or if the arbitrator
commits an error of jurisdiction by wandering outside the
contract and dealing with matters not allotted to them. An
arbitral award stating no reasons for its findings would
make itself susceptible to challenge on this account. The
conclusions of the arbitrator which are based on no
evidence or have been arrived at by ignoring vital
evidence are perverse and can be set aside on the ground
of patent illegality. Also, consideration of documents

1
(2022) 1 SCC 131

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 which are not supplied to the other party is a facet of
perversity falling within the expression “patent
illegality”.”

14. Through Claim No.2, Contractor had claimed extra cost incurred due
to prolongation of the project. As noted above, the Contract was delayed by
18 months for which, Contractor had sought four EOTs by way of four
letters namely 17.02.2017, 12.10.2017, 26.12.2017 and 23.08.2018, which
were granted by the DMRC.
15. Pertinently, DMRC granted EOT on all the four occasions without
imposing any liquidated damages. Indisputably, the Contractor reserved its
right to seek compensation only at the time of seeking third EOT vide its
letter dated 26.12.2017, and in the earlier requests it did not claim any
monetary compensation due to the extensions.
16. AT declined to compensate the Contractor for the remaining 12-
month period holding that the Contractor had accepted EOT granted by
DMRC without compensation and no right to claim the same was reserved
by the Contractor, unlike the third EOT sought for the period 01.01.2018 to
30.06.2018. According to the Contractor, the AT committed a judicial error
amounting to patent illegality in denying compensation on the ground that
the Contractor had forgone its right to claim compensation for the extension
sought on the other three occasions.
17. Contractor has referred to judgments in K.N. Sathyapalan vs State of
Kerala2, Asian Techs Ltd. vs Union of India3, Bharat Drilling vs State of

2
(2007) 13 SCC 43
3
(2009) 10 SCC 354

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Jharkhand4 and Simplex Concrete Piles (India) Pvt. Ltd. vs Union of India5
to contend that even though Clause 4.4 of the Contract and Clauses 2.2 and
8.3 of GCC prohibit the payment of monetary compensation in the cases of
EOT however, the Contractor could still claim compensation under Section
73 of the Contract Act, in the event of breach of contract- which the DMRC
did by not handing over the sites to the Contractor by the promised time.
18. According to this Court, the Contractor is not required to go as far as
to invoke Section 73 of the Contract Act and the aforesaid judgments to
assail the award, since the AT has rather recognised the Contractor’s right to
claim compensation regardless of prohibitive nature of Clause 4.4 of the
Contract and Clauses 2.2 and 8.3 of GCC by referring to the judgment in
Simplex Concrete Piles (Supra). AT’s reluctance to award compensation
stems from the Contractor’s own waiver of the right to claim compensation,
that happened in the first, second and fourth EOT sought by the Contractor,
as opined by the AT. AT read the four extension letters sent by the
Contractor and interpreted them to conclude that it was only the third one
dated 26.12.2017, where the right to claim compensation was reserved.
Therefore, according to the AT, out of 18 months of extension, only 6
months were eligible for compensation. The AT does return a finding of fact
and interpretation of the contract clauses, in favour of the Contractor, to
conclude that DMRC was responsible for delaying the progressive handing
over of the sites to the Contractor.
19. The interpretation of the extension letters by AT, is very well within
its judicial prerogative. It will be judicially inappropriate for this court

4
(2009) 16 SCC 705
5
2010 (115) DRJ 616

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sitting in this jurisdiction, to re-examine the evidence and re-interpret the
same as per its own understanding. The interpretation adopted by the AT of
the evidence is a plausible view and certainly not the kind that will call for
any interference from this court.
20. Coming to Claim Nos.3 and 4, the same relate to deviations in the
quantity of Item No. 8 of BOQ which read as under:

Item 8 Supply of Track Fitting

Item Description Unit Total Rate in Rate in Amount Amount

No. of Items Quantity Indian Foreign in in
Rupees Currency Indian Foreign
(INR) Rupees Currency
(INR)
8. Supply of
Track
Fittings

Item 8.1 for Straight Track & curve having radius flatter than 1750m

Item Descriptio Unit Total Rate Rate in Amount Amount

No. n of Items Quantity in Foreign in in
India Currency Indian Foreign
n Rupees Currency
Rupe (INR)
es
(INR)
8.1 For Set 160000
Straight
Track &
curve
having
radius
flatter than

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 1750m

Item 8.2 for Curved Track

Item Description Unit Total Rate in Rate in Amount Amount

No. of Items Quantity Indian Foreign in in
Rupees Currency Indian Foreign
(INR) Rupees Currency
(INR)
a. Fastening Set 1500
for curve
track
radius
between
1750m to
1000m
(including)

b. Fastening Set 4500

for curve
track
radius
between
1000m to
500m
(including)
c. Fastening Set 19000
for curve
track
radius
between
500m to
300 m
(including)
d. Fastening Set 1500
for curve
track

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 radius less
than 300 m

21. AT rejected the claims by observing that the BOQ specified in the
Contract was not based on number of bolts to be used but on the radius of
the curve. AT also observed that the Contractor was unable to convince that
the increase in number of bolts was due to the new design that the DMRC
required the Contractor to follow. According to the AT, the DMRC’s
insistence on following ETAG001 (European Guideline) was never objected
to by the Contractor at the time of design change suggested by the DMRC or
that the same was not required. AT has further observed that even before the
AT, the Contractor was unable to link the design change to the requirement
of conformity with the European standard and the increase in the number of
bolts.
22. Even otherwise, it is seen that in terms of Clause 5.1 of the Contract,
the Contractor was responsible for submitting the design in accordance with
Clause 6.3.2 of the Contract, which was subject to DMRC’s approval.
Design was submitted by the Contractor on 03.06.2015 and the same was
found to be deficient by DMRC which was conveyed to the Contractor vide
its letter dated 08.06.2015. It is observed by AT in the award that the
Contractor did not challenge DMRC’s comments on the design submitted by
it and on its own re-submitted a new bolt calculation on 19.09.2015.
23. Be that as it may, the rates quoted in Item 8 of the BOQ are for
quantities that are measured in metre length of the track of various radii. The
quantities of individual items of the track fitting system was neither sought
for by DMRC in the BOQ nor quoted by the Contractor when they

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submitted their rates. It would not have been possible for the AT to order
variation in quantities on account of increase in the number of bolts
installed, due to the design change, as was claimed by the Contractor, since,
the same may have been contrary to the BOQ. In any case, the AT has dealt
with the claim in a judicial manner, referring to the contract provisions and
the evidence produced by the parties.
24. At the cost of repetition, it is never enough to reiterate that under
Section 34, the Court is not called upon to reappreciate evidence or correct
the legal errors that the AT may have committed in appreciating the
evidence or interpret the contract clauses or applying the law. There is no
good reason, to interfere with the AT findings in relation to Claim No.3.
25. The last contention relates to Claim No.12 for non-grant of entire
additional GST burden. AT while partially allowing the claim relied on
Clause 27(v) of the SCC which reads as under:-
“Clause 27(v) - Change in Taxes/Duties: The contract price
shall not be adjusted to take into account any increase or
decrease in cost resulting from any changes in taxes, duties,
levies from the last date of submission of the Tender to the
completion date including the dote of extended period of
Contract.”
26. AT allowed claim to the extent of 1.40% on account of the concession
initially agreed to by DMRC. In the considered opinion of this Court, the AT
had rightly relied upon the aforesaid clause which restricted the Contractor
from seeking any adjustment in the Contract price either on the increase or
decrease in cost as a consequence of change in tax duties/levies. In this
regard, it is pertinent to note that AT also noted that the Contractor failed to
provide any substantiation on the amount of input credit availed by it. This
contention is rejected accordingly.

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27. In view of the aforesaid discussions, the petition is dismissed.

(MANOJ KUMAR OHRI)

JUDGE
OCTOBER 9, 2023/rd/ga

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